Bull markets frequently experience stagnation amid heightened optimism, resuming momentum post-dissipation of speculative fervor.

Capriole Investment’s crypto speculation index reveals the attenuation of speculative exuberance observed in the initial quarter, suggesting the prospect of revitalized bullish dynamics for Bitcoin (BTC), the paramount cryptocurrency by market capitalization.

This index, evaluating the proportion of alternative cryptocurrencies (altcoins) achieving 90-day returns surpassing Bitcoin, has settled below 10%, a significant reduction from the January zenith of approximately 60%. Bitcoin, the foremost cryptocurrency by market value, ascended to unprecedented peaks above $70,000 in the first quarter, subsequently cooling to $58,000.

Presently, data from Coingecko indicates the existence of over 14,800 altcoins. A substantial number of these coins are characterized by illiquidity and an inability to substantiate their utility. Consequently, altcoins are predominantly perceived as speculative assets, with their volumes closely correlated with Google Trends, a barometer of retail investor interest. Outperformance of altcoins relative to BTC is often indicative of speculative mania.

Speculative washouts function as corrective mechanisms, realigning asset prices with underlying fundamentals and mitigating excessive speculation, thereby fostering a healthier market environment over the long term.

This trend has been evident in the crypto market. Since 2019, a sub-10% speculation index has consistently aligned with the onset of significant Bitcoin rallies, as observed in early 2019, late 2020, and the latter half of 2023.